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Optimal capacity in the banking sector and economic growth

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  • Bruno Amable

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Jean-Bernard Chatelain

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Olivier De Bandt

    (Centre de recherche de la Banque de France - Banque de France)

Abstract

The paper investigates, from the welfare and growth point of view, the determination of the optimal capacity of the banking system. For that purpose, we consider an overlapping generation model with endogenous growth. There is horizontal differentiation and imperfect competition in the banking sector. Macro-economic shocks affect the return on capital and, together with the expectations of depositors, condition the stability of the banking sector. We specify to what extent deposit insurance may reduce instability and increase the number of deposits, welfare and growth. We also characterise the conditions under which excess banking capacities may appear and how their reduction may improve welfare.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00112535.

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Date of creation: 2002
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Publication status: Published, Journal of Banking and Finance, 2002, 26, 2-3, 491-517
Handle: RePEc:hal:cesptp:halshs-00112535

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00112535
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Keywords: Deposit insurance; Imperfect competition; Banking; Growth; Overlapping generation model;

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Cited by:
  1. Jean-Bernard Chatelain & Kirsten Ralf, 2012. "The Failure of Financial Macroeconomics and What to Do About it," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers), HAL halshs-00706777, HAL.
  2. Marshall, David A., 2002. "Financial crises and coordination failure: A comment," Journal of Banking & Finance, Elsevier, Elsevier, vol. 26(2-3), pages 547-555, March.
  3. Wieneke, Axel & Gries, Thomas, 2011. "SME performance in transition economies: The financial regulation and firm-level corruption nexus," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 221-229, June.
  4. Michael Graff, 2005. "Is There an Optimum Level of Financial Activity?," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 05-106, KOF Swiss Economic Institute, ETH Zurich.
  5. repec:hal:journl:halshs-00706777 is not listed on IDEAS

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